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Quality ETFs Looking Good Bets to Tame Market Turbulence
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Wall Street continues to grapple with the ongoing hurdles that have been impacting the market indices. The Dow Jones Industrial Average once again lost 0.3% on Oct 12. The other two broader indices, such as the S&P 500 and the Nasdaq composite, also dipped 0.2% and 0.1%, respectively.
Commenting on yesterday’s trading session, Stifel analysts said that “Headlines are fairly quiet today as the market awaits several upcoming catalysts like September CPI and retail sales, the latest FOMC minutes, and the start of the Q3 earnings season.” This was reported in a CNBC article.
Investors are also on edge regarding earnings growth in the third-quarter earnings season. Going by Refinitiv data, the September-quarter earnings growth rate might come in at 30% from the year-ago reported figure post a 96.3% rise in the second quarter (as mentioned in a CNBC article).
In another disappointing development, Goldman Sachs (GS) decreased its U.S. economic growth prediction. The investment bank expects economic growth rate of 4% from 4.4% in 2022 (according to a CNBC article). It has also revised its 2021 estimate downward to 5.6% from 5.7%. The firm cited various factors like the diminishing fiscal stimulus support from the Congress and the slow pace of recovery in consumer spendingfor itsdecision.
The latest jobs report for September turned out to be unimpressive as the U.S. economy has added the lowest number of jobs so far this year. 194,000 positions were added in September, missing the forecast of 500,000. Nonfarm employment has risen 17.4 million since April 2020 but slid 3.3% from its pre-pandemic level in February 2020.
Investors may have to handle certain issues like inflationary pressure, supply-chain challenges, possibilities of the Fed tapering the fiscal stimulus, China’s Evergrande crisis and concerns over a debt-ceiling breach in October. These factors can also keep the stock market volatile.
Per a CNBC Market Strategist Survey, Wall Street major strategists are expecting soft returns for the remainder of 2021 as the average year-end S&P 500 target is 4,433.
Quality ETFs Worth a Look
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and healthy margins. These stocks also have a track record of stable or rising sales and earnings growth. In comparison to plain vanilla funds, these products help lower volatility and perform rather well during market uncertainty. Further, academic researches proved that high-quality companies constantly provide better risk-adjusted returns than the broader market over the long term.
Against such a backdrop, we highlighted five ETFs targeting this niche strategy. These could enjoy smooth trading and generate market-beating returns in the current market scenario.
This fund provides exposure to the large- and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index (read: Focus on These ETF Areas to Combat Market Uncertainties).
This fund tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks, that has the highest-quality score based on three fundamental measures, namely, the return on equity, accruals ratio and the financial leverage ratio.
Expense Ratio: 0.15%
AUM: $3.13 billion
FlexShares Quality Dividend Index Fund (QDF - Free Report)
This ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Quality Dividend Index.
This fund offers exposure to stocks that have a combination of value, low volatility and quality-factor strategies. This is done by tracking the MSCI USA Factor Mix A-Series Capped Index.
Image: Bigstock
Quality ETFs Looking Good Bets to Tame Market Turbulence
Wall Street continues to grapple with the ongoing hurdles that have been impacting the market indices. The Dow Jones Industrial Average once again lost 0.3% on Oct 12. The other two broader indices, such as the S&P 500 and the Nasdaq composite, also dipped 0.2% and 0.1%, respectively.
Commenting on yesterday’s trading session, Stifel analysts said that “Headlines are fairly quiet today as the market awaits several upcoming catalysts like September CPI and retail sales, the latest FOMC minutes, and the start of the Q3 earnings season.” This was reported in a CNBC article.
Investors are also on edge regarding earnings growth in the third-quarter earnings season. Going by Refinitiv data, the September-quarter earnings growth rate might come in at 30% from the year-ago reported figure post a 96.3% rise in the second quarter (as mentioned in a CNBC article).
In another disappointing development, Goldman Sachs (GS) decreased its U.S. economic growth prediction. The investment bank expects economic growth rate of 4% from 4.4% in 2022 (according to a CNBC article). It has also revised its 2021 estimate downward to 5.6% from 5.7%. The firm cited various factors like the diminishing fiscal stimulus support from the Congress and the slow pace of recovery in consumer spendingfor itsdecision.
The latest jobs report for September turned out to be unimpressive as the U.S. economy has added the lowest number of jobs so far this year. 194,000 positions were added in September, missing the forecast of 500,000. Nonfarm employment has risen 17.4 million since April 2020 but slid 3.3% from its pre-pandemic level in February 2020.
Investors may have to handle certain issues like inflationary pressure, supply-chain challenges, possibilities of the Fed tapering the fiscal stimulus, China’s Evergrande crisis and concerns over a debt-ceiling breach in October. These factors can also keep the stock market volatile.
Per a CNBC Market Strategist Survey, Wall Street major strategists are expecting soft returns for the remainder of 2021 as the average year-end S&P 500 target is 4,433.
Quality ETFs Worth a Look
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility and healthy margins. These stocks also have a track record of stable or rising sales and earnings growth. In comparison to plain vanilla funds, these products help lower volatility and perform rather well during market uncertainty. Further, academic researches proved that high-quality companies constantly provide better risk-adjusted returns than the broader market over the long term.
Against such a backdrop, we highlighted five ETFs targeting this niche strategy. These could enjoy smooth trading and generate market-beating returns in the current market scenario.
iShares MSCI USA Quality Factor ETF (QUAL - Free Report)
This fund provides exposure to the large- and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index (read: Focus on These ETF Areas to Combat Market Uncertainties).
Expense Ratio: 0.15%
AUM: $23.37 billion
Invesco S&P 500 Quality ETF (SPHQ - Free Report)
This fund tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks, that has the highest-quality score based on three fundamental measures, namely, the return on equity, accruals ratio and the financial leverage ratio.
Expense Ratio: 0.15%
AUM: $3.13 billion
FlexShares Quality Dividend Index Fund (QDF - Free Report)
This ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Quality Dividend Index.
Expense Ratio: 0.37%
AUM: $1.58 billion
SPDR MSCI USA StrategicFactors ETF (QUS - Free Report)
This fund offers exposure to stocks that have a combination of value, low volatility and quality-factor strategies. This is done by tracking the MSCI USA Factor Mix A-Series Capped Index.
Expense Ratio: 0.15%
AUM: $967.4 million
Barron's 400 ETF (BFOR - Free Report)
This ETF seeks investment results that correspond generally, before fees and expenses, to the performance of the Barron's 400 Index.
Total Operating Expenses: 0.70%
AUM: $146.6 million